JSE’s top 40 index sets a fresh record
• Miners and rand hedges drive all share • Friday’s US data could weaken local currency
The JSE all share and the benchmark top 40 hit highs on Thursday on the weaker rand ahead of crucial US data set to be released on Friday, which could weaken the domestic currency and provide further support for the market.
Miners and rand hedges propelled the all share to record levels on the weaker rand and positive global sentiment that has seen US markets hit multiple highs this week.
The all share closed 0.44% higher at 56,999.80 after hitting 57,061.30 in the day. Volumes were low at R15.7bn against an average R20bn as Hong Kong was closed for a public holiday.
The top 40 was up 0.48%, to 50,786.40 after reaching 50,847.60. The all share has gained 12.5% so far in 2017, the best annual performance since 2013, with the top 40 firming 15.68%. Rand hedges, led by Naspers and AnheuserBusch InBev, pushed the market higher, with global miners cashing in on the weaker rand, which could hit R15/$ over the longer term, analysts said.
“I think we have broken out of the three-year consolidation phase which saw the market moving sideways,” said Herenya Capital Advisors trader Petri Redelinghuys.
Redelinghuys said there was still much upside in the market, mainly because of miners, with rand hedges probably pausing over the short term. “We are likely in a cyclical commodities bull market,” he said.
The rand was at R13.64 to the dollar in afternoon trade, from R13.5683, with the next important resistance level at R13.96.
The dollar gained on the euro on Thursday ahead of an expected rate hike by the US Federal Reserve, supported by positive data from the US. The percentage of the market pricing in a December Fed hike ranges between 75% and 85%.
The upbeat trade on the JSE follows surging US markets, with the Dow again hitting a record high on Wednesday. It was heading for another record on Thursday, gaining 0.17%, to 22,700 at the JSE’s close.
Global data had been strong, said Rand Merchant Bank trader
John Cairns. “And while everybody is talking about the Trump trade, based on President Donald Trump’s tax reforms, new stimulatory policies may be in the offing in Germany.”
This follows speculation in the market that the next German finance minister will allow for a fiscal boost along the lines of Trump’s tax cuts.
“A fiscal boost would certainly help Europe, but the size of any potential plan would be small compared to Trump’s, and would not be a game-changer for the rand,” Cairns said.
The US nonmanufacturing ISM index for September (59.8, from 55.3) followed the lead set by the manufacturing index on Monday and jumped to a 12-year high. The ADP employment report also beat expectations at 135,000 jobs created, ahead of crucial nonfarm payroll data set to be released on Friday.
The market expects 80,000 nonfarm jobs to have been created in September from a previous 156,000. Any better number will support the dollar, which will weaken emerging market currencies and support further gains on the JSE.
Investors had marched into the final trading quarter of 2017 with a risk-on attitude as global stocks hit fresh highs, said FXTM analyst Lukman Otunuga.
“However, there is some evidence that market players were adopting a cautious stance ahead of the US jobs report on Friday, but this could only be short-lived,” he said.
The Reserve Bank’s decision to keep rates unchanged was expected to have a limited effect in supporting the rand ahead of further risk events at year-end: the medium-term budget on October 25, another possible ratings downgrade and the ANC’s December conference.
That is despite an environment of low growth and subdued inflation warranting further interest rate cuts.
“The current loosening cycle will remain shallow and shortlived and, therefore, unlikely to boost growth meaningfully,” said Nedbank Corporate and Investment Banking analysts.